India Mulls Five-Year Tax Cut On EV Imports To Attract Tesla, Other Manufacturers: Report

The Indian government is exploring the possibility of reducing import taxes on fully assembled electric vehicles for a period of up to five years.

This initiative aims to attract major EV manufacturers such as Tesla to both sell and eventually manufacture their vehicles in India.

The government is reportedly working on a policy for electric vehicles, which proposes to permit global automobile companies to import electric cars on concessional duty rates.

The reduction in import duty is contingent on these companies' commitment to eventually establish manufacturing facilities in India, Business Standard reported citing people familiar with the matter.

However, a final decision on the specific details of this policy has not been made yet.

Back in 2021, the Austin-based electric vehicle manufacturer had requested reductions in import duties for EVs. The company was hoping to have the tariffs reduced to 40 per cent, a significant reduction from the existing range of 70-100 per cent for its vehicles, depending on their import value.

Later this week, Tesla CEO Elon Musk is likely to meet Commerce and Industry Minister Piyush Goyal to discuss the company’s plans to set up a factory in the country.

Goyal is in San Francisco to attend the ministerial engagements of Indo-Pacific Economic Framework and the Asia-Pacific Economic Cooperation.

Tesla aims to penetrate one of the most lucrative automotive markets globally, where there's a growing demand for electric vehicles among India's expanding middle class.

For India, an investment from Tesla would support the government's objective to expand the manufacturing sector's contribution to the national GDP and facilitate job creation.

The electric car market in India is still in its early stages, with electric vehicles making up only 1.3 per cent of all passenger vehicle sales last year, as reported by BloombergNEF.

Factors such as the high prices of EVs, limited model choices, and insufficient charging infrastructure have impeded their wider adoption in the country.

Liberalising the electric vehicle sector may accelerate the shift towards cleaner transportation in a nation currently grappling with some of the most polluted air in the world.

In 2021, the government had launched a $3.1 billion incentive scheme to boost domestic production of electric vehicles.